George backs euro-zone 'success'

Bank of England Governor Sir Eddie George lent support to his counterparts at the European Central Bank and declared himself a 'euro-pragmatist' - neither a sceptic nor a fanatic about membership of the single currency.

The man labelled by the markets as generally euro-sceptic said British entry was a political decision. 'My role is not to get involved in the politics, it is to draw attention to the economic pros and cons,' he told a House of Lords sub-committee on the European Union.

Sir Eddie said there were potential economic advantages to Britain's joining the euro, including the stability of exchange rates with European trading partners for businesses.

But there were also problems associated with the 'one-size-fits-all' effect of the euro-zone. The City of London had not been damaged by Britain's current position outside the 11-member euro club. Sir Eddie said the new currency zone had been generally successful in economic terms despite the euro's weakness, which he blamed largely on the 'magnet effect' of the US's highly productive economy on long-term global capital flows. It was not just a case of the euro-zone pushing investment away.

Speaking of the euro member countries, he said: 'The prospect for relatively strong growth is quite good. Unemployment has started to come down finally from its terribly high levels. Inflation, core inflation, has been really quite low.'

In comments that could be seen as a defence of embattled ECB president Wim Duisen-berg, he added that the widespread criticisms of the central bank's running of monetary policy had been 'a bit over-stated'. Duisenberg faced calls to resign after suggesting publicly that further intervention to bolster the euro was unlikely.

Meanwhile, the single currency gained after Bundesbank president Ernst Welteke said the ECB would take an inter-ventionist stance if necessary. He was later joined by US Treasury Secretary Lawrence Summers who said there was a case for intervention in certain situations.

After dragging along at 84 cents, it picked up to 84.78 - still some way off yesterday's high of 85.30. The euro had tumbled sharply overnight after a surging Dow Jones Industrial Average saw investors returning to the dollar.

Figures showed US consumer confidence fell in October to its lowest level in a year on concerns of high oil prices and stock market jitters. Americans tend to be more heavily invested in shares than the British, and cold winters in much of the country make heating oil a vital commodity.